Guernsey: How To Set Up A Fund In Guernsey Amidst AIFMD

Last Updated: 27 June 2013
Article by Caroline Chan

Most Read Contributor in Guernsey, November 2017

Caroline Chan of Ogier describes the processes behind setting up an alternative investment fund in Guernsey.

With 40 years' experience, Guernsey has developed into a leading jurisdiction for the establishment of investment funds. For example, Guernsey remains the leader in non-UK listings on the London Stock Exchange, in terms of the number of its companies listed/traded on the LSE markets. At the end of last year Guernsey had 122 vehicles listed on the combined markets of the LSE. Significant growth in the local funds industry has also been achieved in recent years. This can be attributed in part to the policies of the Guernsey authorities and the flexibility of the regulatory system, together with the high quality of services available in Guernsey in relation to fund management, administration and custody and strong legal, tax and accounting expertise.

Regulatory framework

The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (POI Law) sets up a modern statutory structure for the regulation and administration of investment funds in Guernsey. It provides a framework for investor protection whilst retaining the flexibility to adapt quickly to market conditions. The Guernsey Financial Services Commission (GFSC) is always willing to entertain applications from promoters of the first rank who have a demonstrable and favourable track record in the establishment and/or management of investment funds. Funds and persons providing services to funds in Guernsey are regulated by the POI Law. Funds established in Guernsey (whether open-ended or closed ended) must be authorised or registered before issuing shares, units or limited partnership interests. Fund service providers carrying on their business in Guernsey require a licence.

Rules made under the POI Law govern disclosure requirements and the operation of the various types and classes of investment funds. Save in respect of Class A authorised open-ended schemes, the Guernsey rules are relatively non-prescriptive, relying instead on disclosure.

For example, they do not contain any valuation rules, nor do they prescribe any specific investment or leverage parameters. Further, licensee conduct of business rules and capital adequacy rules apply to fund service providers.

Type of fund structures available

The types of investment vehicle most often used in Guernsey are closed-ended and open-ended investment companies, unit trusts and closed-ended limited partnerships. A company in Guernsey may also be established as a protected cell company, which offers legal segregation at cell level; or as an incorporated cell company, with one or more incorporated cells, which are each companies.

Types and classes of fund

An investment fund may be established as open-ended or closed-ended. An open-ended fund is essentially one where investors are entitled to redeem their holdings at a price related to net asset value. A closed-ended fund is one where investors do not have such entitlement, although redemptions may be made at the discretion of the fund entity.

All Guernsey funds require a Guernsey administrator (designated manager). All open-ended funds also require a Guernsey custodian (designated custodian), save that for hedge funds, a prime broker, regulated in an acceptable jurisdiction and having substantial net worth, may be appointed, subject to certain conditions.

An open-ended fund will be authorised under one of three categories: Class A, Class B or Class Q; or be

registered. A closed-ended fund may be either authorized or registered.

Authorised (i.e. regulated) funds are subject to ongoing supervision by the GFSC. Registered funds are subject to a lighter touch regulatory regime.

The Guernsey regime is flexible enough to cater for all types of investment fund and there is no need for specific fund products in terms of the potential number of investors. There are, however, minimum investment or investor qualification restrictions in relation to Class Q schemes or authorised funds established as QIFs (Qualifying Investor Funds), as explained further below.

Authorised Funds


An open-ended authorised fund may be established as Class A, Class B or Class Q. Class A schemes, which may be marketed more widely in certain jurisdictions, are subject to a higher level of regulation in their operations than Class B or Class Q schemes and are aimed at the retail end of the market. The rules that govern Class B schemes are designed

to be relatively flexible, with reliance placed on disclosure. The GFSC may derogate from any of the requirements of the Class B scheme rules if they are satisfied that investor protection will not be compromised.

Because of their flexibility, Class B schemes have proved to be the most popular and are utilised for various purposes, including hedge funds. Class Q schemes are available to â€Üqualified professional investors' (which definition includes a public authority or person satisfying the relevant minimum net assets or net worth criteria). The Class Q scheme rules may be similarly derogated from and greater discretion is permitted, with the emphasis again on disclosure.


An authorised closed-ended fund is subject to certain specified disclosure requirements, but is not required to appoint a Guernsey resident custodian. The Authorised Closed-ended Investment Schemes Rules 2008 apply.

Qualifying Investor Funds

A fund may be established as a QIF (for example, a Class B QIF or an authorised closed-ended QIF), enabling the promoter to take advantage of a fast track application process (see further below). Certain conditions apply. Principally, the investors in the fund are restricted to categories of persons deemed to be able to evaluate the risks involved, including certain public bodies, knowledgeable employees and experienced investors. In practice, the easiest way to qualify is by imposing a minimum investment of USD100,000.

Registered funds

As an alternative to an authorised fund, open-ended and closed-ended funds may be registered. A 3 business day fast track application process applies. Registered funds are subject to the Registered Collective Investment Scheme Rules 2008 and the Prospectus Rules 2008, which contain the relevant disclosure requirements.

As noted, a Guernsey resident administrator is required for all Guernsey registered funds. A registered open-ended fund also requires a Guernsey licensed custodian. Although registered funds may not be offered to the public in Guernsey, they may be offered to appropriately licensed Guernsey entities.

Fund application process

A standard application process applies for authorized funds, unless established as a QIF. This involves three stages: outline authorisation, interim authorisation and formal authorisation. It is important to note that the relevant Guernsey service providers (administrator and custodian, as applicable) must be on board at the outset, as they will be required to support the application. In addition, if the promoter is not known to the GFSC, a preliminary due diligence stage will need to be completed by the GFSC (the New Promoter process), before a formal fund application is submitted. If this process is undertaken this may shorten the timeframe for the fund application process itself.

At outline authorisation stage the GFSC will consider basic information regarding the structure of the fund, its investment activities and the parties involved. At the interim stage, the application fee is paid and the GFSC reviews a copy of the draft fund offer document, which must meet the applicable disclosure requirements. Final versions of the offer document, constitutive documents and material agreements are then filed at the final stage in order for formal authorisation to be granted. The whole process can typically take around 6 to 8 weeks. A fast track application process applies for registered funds. Registration will be granted 3 business days after filing completed application documents with the GFSC.

Instead of reviewing the fund documentation, the GFSC relies on certain warranties to be given by the fund administrator, which conducts appropriate due diligence and confirms certain matters to the GFSC, including in relation to the propriety and track record of the fund promoter.

A similar fast track application process applies for a fund to be established as a QIF. Fund directors, together with directors, managers and controllers of a promoter, are each required to complete a personal questionnaire form (Form PQ) or update information already held by the GFSC by a Form PD.

Licence applications

The Guernsey service providers to be appointed will normally already hold the necessary licence. A Guernsey resident investment manager is not a requirement for a Guernsey investment fund. However, if a new manager (including, for example, a general partner) is to be established in Guernsey by the fund promoter, it too will require a licence under the POI Law. A licence application process may be run concurrently with a fund application and the process typically takes between 3 to 4 weeks to complete. However, the GFSC will entertain a fast track POI Law licence application for a general partner or an entity proposing to carry out management services in Guernsey, in relation to a fast track fund application (for registered funds or QIFs). The GFSC is expected to issue a licence using the fast track process within 10 business days from submission of all requisite documents.

Stock Exchange listings

Investment funds established in Guernsey are eligible for listing on many of the major international stock exchanges. They may also be listed on the Channel Islands Stock Exchange. A stock exchange listing will add further disclosure requirements.


With certain exceptions, all Guernsey companies now pay a standard rate of 0% income tax on their profits. A Guernsey investment fund continues to be eligible to apply for exempt tax status, which may be renewed annually upon payment of £600. There is no capital gains tax in Guernsey, nor is there any corporation tax or stamp duty payable on the transfer of shares or units in an investment fund.

Alternative Investment Fund Manager Directive (AIFMD)

Various steps have been taken to ensure that business in Guernsey may continue as usual following transposition of the AIFMD into EU member state national law in July 2013. The GFSC has announced that it will operate a dual regime. The existing investment funds regulatory regime will continue unchanged. However, it will be supplemented by an AIFMD compliant opt-in regime for those funds and managers finding themselves within scope of AIFMD.

On 30 May 2013 the European Securities and Markets Authority (ESMA) announced that it had approved the cooperation arrangements on behalf of securities regulators from the 27 EU member states, Croatia and the wider European Area (Iceland, Liechtenstein and Norway) to be put in place with their counterparts in 34 Third Countries, including the GFSC. This means that the GFSC may now take steps to sign up a bilateral agreement with each of the individual EU securities regulators, so that Guernsey funds may be marketed in that country post July 2013.

Originally published in Hedgeweek's Guide to setting up alternative investment funds, June 2013

For more information about Guernsey's finance industry please visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions